Friday, December 2, 2016

"We live in a society driven by debt"

"Cars, for example, have become hugely expensive (even on the low end) relative to what people can afford – because of the easy availability of credit. Which is the nice word used to speak about debt, intended to encourage us to get into it.

It takes at least $15,000 or so to drive home in a “cheap” new car, once all is said and done. And the “cheap” car will have to be registered, plated and insured.

It runs into money.

And most new cars cost a lot more money.

Which most people haven’t got.

So they get debt.

A loan.

Which, when it becomes commonly resorted to as a way to live beyond one’s means as a lifestyle, drives up the cost of life for everyone. Including those who try to live within their means – or better yet, below them.

Easily obtainable debt obtained by many who probably won't be able to pay it back
is kicking a can, as long as the central banks can contain the fallout
until they can't

When most people (when enough people) are willing – are eager – to go into hock for the next six [to seven] years in order to have a car with an LCD touchscreen, leather (and heated) seats, six air bags, a six-speaker stereo, electronic climate control AC and power everything – which pretty much every new car now comes standard with – the car companies build cars to satisfy that artificial demand.

Artificial demand creates higher levels of real risk

Artificial because based on economic unreality.

Economic unreality leads to higher levels of real instability

That is a good way to think about debt.

It is nonexistent wealth.

The economy is relatively fake

You are promising to pay with money you haven’t earned yet.

And maybe won’t.

Think most of  the recent college graduates will be able to pay back their loans
with jobs that pay half of what they did ten years ago?

The car market has become like the housing market – which has also been distorted by debt to a cartoonish degree. The typical new construction home is a mansion by 1960s standards. Not that there’s anything wrong with living in a mansion. Or driving a car with heated leather seats [etc...].

Provided you can afford it.

Most people can’t.

One paycheck away

One hospital visit away

One auto accident

One arrest

One layoff

Normally, that fact would keep things in check.

Not while the banks are handing out cash, much of which won't be repaid,
but it's okay as long as the central banks can maintain a passive existence
until they can't

...We wouldn’t be living in this economic Potemkin village that appears prosperous but is in fact an economic Jenga Castle that could collapse at any moment.

...Like the housing industry, the car industry has ceased building basic and much less expensive cars because of easy and grotesque debt-financing.

Which is tragic.

There ought to be (and would be) a huge selection of brand-new cars priced under $10,000 were it not for the ready availability of nonexistent wealth (.e., debt and credit).

Easily obtainable artificial debt = Artificially higher prices = Ponzi

Cars many people could pay cash for..."

http://ericpetersautos.com/2016/12/01/life-in-hock/
Post a Comment